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Status:
"but it depends on what the definition of "is" is."
(set 17 days ago)

Location: Clyde Hill, WA

3,696 posts, read 656,401 times

Reputation: 1178

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The minimum wage as currently constituted is a economic charade that hurts those it purports to help. When I took econ 101, our textbook, written by the liberal economist Paul Samuelson, had a supply demand graph and a few lines of algebra showing how this was so.

Suppose you're a 10-yr-old with an apple tree in your yard. In season, you can pick 10 apples per day and sell them for $1, giving you a nice bit of spending money. But you can't afford your dream bicycle on that (fancy bikes can now go for 5 figures).

Along comes Mayor Pete and says, "tell you what I'm gonna do for you, kid. I'm gonna institute a $5 minimum apple price. We're gonna get you that dream bike."

But at $5 dollars, nobody wants to buy an apple except maybe the rich widow down the street who feels sorry for him once per week and buys. So his income goes from $10 day to $5/wk. thanks to Mayor Pete's "help."

The minimum wage is good for getting votes for guys like Mayor Pete, but it doesn't on balance help low-wage workers. It on balance hurts them.

Now there is the idea of the universal basic income from Democratic candidate Andrew Yang. Just for drawing breath, you are entitled to a certain minimum level of income every month. This indeed would help the low-skill, low-wage worker, but would be very expensive for the taxpayer.

What if we combined the two ideas? Let the wage rates float up and down according to the market, but if the wage goes below a certain level (say $15/hr), the government makes up the difference with a subsidy. This is essentially how US agriculture price supports work. If the price of corn goes below a certain threshold, the corn farmer gets a check from Uncle Sam to make up the difference.

Status:
"but it depends on what the definition of "is" is."
(set 17 days ago)

Location: Clyde Hill, WA

3,696 posts, read 656,401 times

Reputation: 1178

Quote:

Originally Posted by Creekcat

Wouldn't it still be bad for anyone that participates in the economy? As in, that money has to come from somewhere.

Yes it would still be expensive for the taxpayer, but not as much as a straight UBI. However, it would actually help low-wage, low-skill workers unlike the charade we have now with the straight, 'fiat' minimum wage.

Status:
"but it depends on what the definition of "is" is."
(set 17 days ago)

Location: Clyde Hill, WA

3,696 posts, read 656,401 times

Reputation: 1178

To expand on option 3, I read sometime back that Sweden does not have a minimum wage. But their national labor laws are such that most private sector workers are unionized. Hence they have a professional team of negotiators working for them at contract time, to ensure that they receive decent wages.

US private sector jobs are now only about 6% union. In the 1950s the number was around 33%.

The textbook economics books on how the minimum wage works is good in theory. But, in reality, there is so much more to things than supply demand graph. Indeed, how you treat people plays a big role in how people feel and how long they will want to remain with your company, which means that you're spending less money advertising for new jobs and less money training the non-stop rotating door of employees. And money goes a long way to how people feel. This is what I learned in my organizational behavior, human resources, and labor economics studies.

Moreover, the minimum wage in this country has rarely ever been a true fair market wage (due to the power imbalance between workers and management, though, workers have rarely been able to exert their position for increased wages without the threat of being fired unless they had legal protections to include the protection of a union), so there's been room for companies to pay more without the economy being devastated. Instead of doomsday predictions by economists on the bad effects of raising the minimum wage, I care more about results, and these doomsday scenarios have rarely come to pass (in fact, I can't think of anytime where they have come to pass in this country).

Now, I'm not saying that there is not a point where too high of a minimum wage would not hurt things. And, in NYC, we see some harm for the new $15 minimum wage in terms of hours being cut and the average worker earning something like $100 less per pay period; note, restaurant workers in NYC seem to be thriving, however, under the new wage. But even here I caution people about jumping to conclusions as things may still work out better for all if these workers stay on the job longer and management doesn't have to deal with the costs associated with high turnover. Then, of course, there's the point where people may feel better off for being able to work fewer hours while essentially earning the same pay

Nobody is forcing anyone to take a low paying job. If everyone were to refuse to work for company XX due to their low wages, said company will have no option other than to offer wages at a rate acceptable to workers.

Status:
"but it depends on what the definition of "is" is."
(set 17 days ago)

Location: Clyde Hill, WA

3,696 posts, read 656,401 times

Reputation: 1178

Quote:

Originally Posted by MikMal

Nobody is forcing anyone to take a low paying job. If everyone were to refuse to work for company XX due to their low wages, said company will have no option other than to offer wages at a rate acceptable to workers.

However, most people don't know how to negotiate a good wage for themselves, and end up getting the short end of the stick.

However, most people don't know how to negotiate a good wage for themselves, and end up getting the short end of the stick.

What other people don't know how to do is their problem.

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